Question 1

As demonstrated in Pelican National Bank v.Provident Bank of Maryland,the case in the text,when checks are ambiguous,courts apply the default rule that:

Accepted Answer

A) treats the document as if it was payable in the alternative. 
B) treats the document as if it was payable jointly. 
C) pays the parties pro rata with their claims. 
D) a virgule punctuation mark means "and" and not "or." 
A) treats the document as if it was payable in the alternative. 
B) treats the document as if it was payable jointly. 
C) pays the parties pro rata with their claims. 
D) a virgule punctuation mark means "and" and not "or."

Question 2

Carl writes a check made payable to "Patricia Sullivan or William Hayes." Who may negotiate the check?

Accepted Answer

A) Neither Patricia nor William,because the check is unenforceable. 
B) Patricia,because she is the first named party to whom the check is made payable. 
C) William,because he is the last named party to whom the check is made payable. 
D) Either Patricia or William may negotiate the check. 
A) Neither Patricia nor William,because the check is unenforceable. 
B) Patricia,because she is the first named party to whom the check is made payable. 
C) William,because he is the last named party to whom the check is made payable. 
D) Either Patricia or William may negotiate the check.

Question 3

Which of the following statements about the "payable on demand" requirement of negotiable instruments is true?

Accepted Answer

A) An instrument may be postdated,and normally an instrument "payable on demand" is not payable before the date of the instrument. 
B) A promise or order is "payable on demand" only if it states it is payable on "sight." 
C) A promise or order is "payable on demand" only if it states a time for payment. 
D) A promise or order is "payable on demand" only if it states it is payable on "demand." 
A) An instrument may be postdated,and normally an instrument "payable on demand" is not payable before the date of the instrument. 
B) A promise or order is "payable on demand" only if it states it is payable on "sight." 
C) A promise or order is "payable on demand" only if it states a time for payment. 
D) A promise or order is "payable on demand" only if it states it is payable on "demand."

Question 4

The requirement that,to be negotiable,an instrument must promise or order payment of a fixed amount of money applies:

Accepted Answer

A) only to principal. 
B) only to interest. 
C) to both principal and interest together. 
D) neither to principal nor interest. 
A) only to principal. 
B) only to interest. 
C) to both principal and interest together. 
D) neither to principal nor interest.

Question 5

There are two types of negotiable instruments.

Accepted Answer

A) True 
 B)False

Question 6

The term commercial paper is defined as a(n):

Accepted Answer

A) contract for the payment of money. 
B) agreement between nations for the benefit of commerce. 
C) receipt of goods bartered between businesses. 
D) warranty on goods shipped in international commerce. 
A) contract for the payment of money. 
B) agreement between nations for the benefit of commerce. 
C) receipt of goods bartered between businesses. 
D) warranty on goods shipped in international commerce.

Question 7

Except for ________,to be negotiable an instrument must be "payable to order or to bearer."

Accepted Answer

A) promissory notes 
B) bonds 
C) checks 
D) certificates of deposit 
A) promissory notes 
B) bonds 
C) checks 
D) certificates of deposit

Question 8

Which of the following would be a nonnegotiable instrument?

Accepted Answer

A) "Payment is subject to the terms of a mortgage dated August 12,2011." 
B) A statement in the instrument that it was given in payment of last month's rent. 
C) A statement in the instrument that it was given in payment of the purchase price of goods. 
D) "This note is secured by a mortgage dated January 13,2011." 
A) "Payment is subject to the terms of a mortgage dated August 12,2011." 
B) A statement in the instrument that it was given in payment of last month's rent. 
C) A statement in the instrument that it was given in payment of the purchase price of goods. 
D) "This note is secured by a mortgage dated January 13,2011."

Question 9

What are the conditions necessary for a person to be able to accept a negotiable instrument as a substitute for money?

Accepted Answer

In order to accept a negotiable instrume

Question 10

________ is a medium of exchange authorized or adopted by a domestic or foreign government and includes a monetary unit of account established by an intergovernmental organization or by agreement between two or more nations.

Accepted Answer

A) Domestic currency 
B) Foreign currency 
C) Embargo 
D) Money 
A) Domestic currency 
B) Foreign currency 
C) Embargo 
D) Money

Question 11

If a promise or order contains a conspicuous statement that the promise or order is not negotiable,it is not a negotiable instrument even if it meets the test for negotiability.

Accepted Answer

A) True 
 B)False

Question 12

If an instrument is an order to pay,it must contain an unconditional order.

Accepted Answer

A) True 
 B)False

Question 13

Traveler's checks that commonly require,as a condition to payment,a countersignature of a person whose specimen signature appears on the draft.Traveler's checks are:

Accepted Answer

A) voidable. 
B) negotiable. 
C) nonnegotiable. 
D) unenforceable. 
A) voidable. 
B) negotiable. 
C) nonnegotiable. 
D) unenforceable.

Question 14

An instrument can be made payable to two or more payees.

Accepted Answer

A) True 
 B)False

Question 15

To qualify as a negotiable instrument,an instrument in the form of a note must be signed by the:

Accepted Answer

A) payee. 
B) drawee. 
C) assignee. 
D) maker. 
A) payee. 
B) drawee. 
C) assignee. 
D) maker.

Question 16

The ________ has adopted a regulation that alters the rights of a holder in due course in consumer purchase transactions.

Accepted Answer

A) Securities and Exchange Commission 
B) Consumer Product Safety Commission 
C) Bureau of Consumer Financial Protection 
D) Federal Trade Commission 
A) Securities and Exchange Commission 
B) Consumer Product Safety Commission 
C) Bureau of Consumer Financial Protection 
D) Federal Trade Commission

Question 17

A person creates a handwritten instrument in pencil on a piece of wrapping paper.The instrument is:

Accepted Answer

A) negotiable even though it is handwritten. 
B) nonnegotiable because it is handwritten. 
C) nonnegotiable since it is written on a piece of wrapping paper. 
D) void. 
A) negotiable even though it is handwritten. 
B) nonnegotiable because it is handwritten. 
C) nonnegotiable since it is written on a piece of wrapping paper. 
D) void.

Question 18

If a bank maintains an electronic deposit and provides the customer with a statement indicating the amount of principal held on a certificate of deposit (CD),such a CD is negotiable.

Accepted Answer

A) True 
 B)False

Question 19

A holder in due course is subject to the defense of ________ if the maker of a note wrote it under a threat of force.

Accepted Answer

A) fraudulent inducement 
B) infancy 
C) duress 
D) breach of warranty 
A) fraudulent inducement 
B) infancy 
C) duress 
D) breach of warranty

Question 20

If the description of interest in the instrument does not allow the amount of interest to be ascertained,then interest is payable at the:

Accepted Answer

A) variable rate. 
B) judgment rate. 
C) order rate. 
D) fixed rate. 
A) variable rate. 
B) judgment rate. 
C) order rate. 
D) fixed rate.

Exam 31: Negotiable Instruments

As demonstrated in Pelican National Bank v.Provident Bank of Maryland,the case in the text,when checks are ambiguous,courts apply the default rule that:

Carl writes a check made payable to "Patricia Sullivan or William Hayes." Who may negotiate the check?

Which of the following statements about the "payable on demand" requirement of negotiable instruments is true?

The requirement that,to be negotiable,an instrument must promise or order payment of a fixed amount of money applies:

There are two types of negotiable instruments.

The term commercial paper is defined as a(n):

Except for ________,to be negotiable an instrument must be "payable to order or to bearer."

Which of the following would be a nonnegotiable instrument?

What are the conditions necessary for a person to be able to accept a negotiable instrument as a substitute for money?

________ is a medium of exchange authorized or adopted by a domestic or foreign government and includes a monetary unit of account established by an intergovernmental organization or by agreement between two or more nations.

If a promise or order contains a conspicuous statement that the promise or order is not negotiable,it is not a negotiable instrument even if it meets the test for negotiability.

If an instrument is an order to pay,it must contain an unconditional order.

Traveler's checks that commonly require,as a condition to payment,a countersignature of a person whose specimen signature appears on the draft.Traveler's checks are:

An instrument can be made payable to two or more payees.

To qualify as a negotiable instrument,an instrument in the form of a note must be signed by the:

The ________ has adopted a regulation that alters the rights of a holder in due course in consumer purchase transactions.

A person creates a handwritten instrument in pencil on a piece of wrapping paper.The instrument is:

If a bank maintains an electronic deposit and provides the customer with a statement indicating the amount of principal held on a certificate of deposit (CD),such a CD is negotiable.

A holder in due course is subject to the defense of ________ if the maker of a note wrote it under a threat of force.

If the description of interest in the instrument does not allow the amount of interest to be ascertained,then interest is payable at the:

The Nature of Law

The Resolution of Private Disputes

Business and the Constitution

Business Ethics, Corporate Social Responsibility, Corporate Governance, and Critical Thinking

Criminal Law and Procedure

Intentional Torts

Negligence and Strict Liability

Intellectual Property and Unfair Competition

Introduction to Contracts

The Agreement: Offer

The Agreement: Acceptance

Consideration

Reality of Consent

Capacity to Contract

Illegality

Writing

Rights of Third Parties

Performance and Remedies

Formation and Terms of Sales Contracts

Product Liability

Performance of Sales Contracts

Remedies for Breach of Sales Contracts

Personal Property and Bailments

Real Property

Landlord and Tenant

Estates and Trusts

Insurance Law

Introduction to Credit and Secured Transactions

Security Interests in Personal Property

Bankruptcy

Negotiation and Holder in Due Course

Liability of Parties

Checks and Electronic Transfers

The Agency Relationship

Third-Party Relations of the Principal and the Agent

Introduction to Forms of Business and Formation of Partnerships

Operation of Partnerships and Related Forms

Partners Dissociation and Partnerships Dissolution and Winding up

Limited Liability Companies, limited Partnerships, and Limited Liability Limited Partnerships

History and Nature of Corporations

Organization and Financial Structure of Corporations

Management of Corporations

Shareholders Rights and Liabilities

Securities Regulation

Legal and Professional Responsibilities of Auditors, Consultants, and Securities Professionals

Administrative Law

The Federal Trade Commission Act and Consumer Protection Laws

Antitrust: the Sherman Act

The Clayton Act, the Robinsonpatman Act, and Antitrust Exemptions and Immunities

Employment Law

Environmental Regulation

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